The Changing Retirement Landscape and How to Prepare for It

The Changing Retirement Landscape and How to Prepare for It

With a continued influx of baby boomers retiring, the retirement landscape is about to undergo a seismic shift.


What does it mean to be a baby boomer? First, there's demographics: Between 2000 and 2011, the percentage of Americans over 65 years of age grew 18% - with the number of people at or above retirement age ballooning to over 41 million since the first baby boomers turned 65 in 2011, the demographics have shifted rapidly. A recent Administration on Aging report indicates this trend is going to continue.


Then there's longevity. The average life expectancy for an American in 1900 was 47 years. Today, the average American will live approximately 78.7 years. The trend is expected to continue, and by 2040, individuals over 65 will comprise around 20% of the entire population, according to the National Center for Health Statistics.


Now, the crunch. Most Americansmay be under-prepared for what lies ahead, according to experienced professionals. Weve never had this many people in retirement in the U.S. at one time. And, sadly, the majority of boomers may not be prepared economically or psychologically. It is important to plan because there may not be a second chance.


When accumulating assets for retirement, you can monitor how you are doing and make changes during that time. Many people spend the last decade that they work in a sprint' to retirement, saving as much as they can. However, in the distribution phase, it is more difficult to make these adjustments, and once you run out of money, there is no reversing that. This is what I mean by saying there is no second chance.


The Economic Landscape


Here are some of the dominant trends in play right now:


  • Many more Americans will be supporting both a child and a parent. These people have been labeled as the sandwich generation because they are supporting both older and younger people.
  • Boomers have a 'high lifestyle' that can cause them to spend beyond their means, thinking of luxuries like expensive food and drink, automotive upgrades and more as necessities.
  • More than two-thirds of boomers don't know how to categorize their expenses in retirement.
  • With Social Security and pensions under siege, many Americans are beginning to realize they are going to be responsible for funding their own retirement. However, most boomers may be ill-equipped to manage their assets. Aging can diminish the seniors ability to make the right economic decisions as retirement money gets spent during the 65-75 or 65-80 years.


Retirees face the challenges of creating income streams they can live on, while hedging for retirement and doing estate planning, all of which takes particular financial savvy and strategy that is sound.


As an example, boomers healthier and living longer than previous generations are beginning to work in creative ways after their so-called retirement.One of the hallmarks of todays work till you drop society is a dazzling array of freelance or self-employment efforts that could be categorized as small businesses, where forward-looking seniors start to build revenue streams with existing assets: land, equipment, vehicles, etc. as well as skills and experience developed during the course of a career.


Funding Retirement


Funding retirement relies on smart planning. It also relies on a good set of revenue streams, and a handle on expenses.


First, seniors should consider the classic three legged stool funding most retirement lifestyles: pensions, social security and private retirement savings. As pensions continue to disappear, the third aspect, personal savings, becomes much more important.


To handle a retirement budget, older Americans are also going to have to look at what expenses are critical, and which can be dependent on changes in income or other outcomes, such as financial windfalls. For example, items like food and housing are basics necessities, but other expenses, such as travel and investing in hobbies, are not. By matching expenses with revenue, seniors create their own financial solvency just as other individuals, or larger institutions and businesses, also do.

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